Lecture 7

Question 1

exposures to an employee

Answer 1

financial and emotional costs of medical care, lost wages, satisfaction/feeling good

Question 2

exposures to employers

Answer 2

• intellectual capital (most valuable)
• costs of searching for, hiring, training, developing, keeping talent (consequential loss exposure)
• financial assets used to pay for liabilities
• financial assets used to pay non-wage compensation (traditional HR-employee benefits)

Question 3

what are employee benefits?

Answer 3

1. Health care/dental care
2. paid time off
3. 401 k match (retirement)
   - disability insurance, life insurance, pay to go to school, wellness program, cafeteria/gym

Question 4

what is the value of employee benefits?

Answer 4

1/3 of all benefits (66% wages, 33% benefits)

Question 5

reasons to provide employee benefits

Answer 5

to motivate workers

to get good workers/retain them

Question 6

role of the risk manager regarding employee benefits

Answer 6

typically financing and safety, not selecting

managing volatility in regards to safety

Question 7

perils associated with employee benefits

Answer 7

• employee’s inability to earn an income (
• employee’s use of health care
• other (parental/child care needs, tuition reimbursement)

Question 8

hazards associated with employee benefits

Answer 8

aspects of work conditions, workforce characteristics, labor supply

Question 9

who has less disabilities?

Answer 9

old people because they work slower and more carefully than younger people-but when they do need disability pay it takes longer because they’re older and take longer to heal

Question 10

group health coverage

Answer 10

• high (and usually rising) costs, as well as % uninsured have been problems
• affordable care act
• for small employers, also issues of variability in costs, but not much variability for large employers
• complexity to patients (complex pmt system-no one understands what bills are)

Question 11

some responses to rising health care/% unemployed

Answer 11

• moral hazard issues
• managed care plans (Health Maintenance Orgs)
• consumer directed health plans
• other (Affordable Care Act)

Question 12

types of pension plans

Answer 12

• defined benefit
• defined contribution
• either type may be contributory or noncontributory

Question 13

defined benefit

Answer 13

employer indicates a formula to be used when the employee retires. Employer must put aside sufficient assets each pay period to hold sufficient funds when workers retire (a lot of unknown to the employer)

Question 14

defined contribution

Answer 14

employer indicates an amount to be paid into the retirement system each period. Retirement benefit equals the value of those contributions at the time of retirement (not much unknown for employer)

Question 15

contributory

Answer 15

employees pay into the system (and often employer does as well)

Question 16

noncontributory

Answer 16

where only employers pay into the system

Question 17

underfunding for retirement

Answer 17

current issue so most pensions have shifted to defined contribution or employee contributions such as Individual Retirement Account